At one time or another, we have all dreamed of having a little place by the sea, or maybe one up in the mountains. The great thing about owning a holiday home is that you can not only enjoy your very own home from home whenever you please, you can also let it out for others to enjoy and make the most of the profits that they bring you.
The COVID-19 lockdowns have meant that many more of us are thinking about taking staycations and enjoying the amazing sights that the UK has to offer. This makes it a great time to invest in a holiday let property that, unlike other buy-to-let properties, can still obtain higher and top-rate tax relief on mortgage interest repayments.
With a potential income of between £12,000 and £15,000 a year for a two-bedroomed cottage, there are some great benefits to having a holiday let in your grasp.
If you are buying a holiday home with the intention of letting it out, then you need to choose it with your business head on. Make sure that you stick with what you know instead of venturing into unfamiliar territory as this will help you to understand the potential of your property and whether it is worth the rent that you plan to charge.
If you buy a property that you love in an area that you know and love, then you have advantages when it comes to attracting tenants. You can trade off the local attractions and can store useful items such as beach equipment and children’s toys.
Offering useful tips for holidaymakers, providing a few takeaway menus and letting them know about deals and promotions in the area will all make you seem like the perfect holiday host. This will help you to build a reputation and should lead to some favourable reviews online.
Try and make sure that you stay in your holiday home yourself. A yearly visit will give you a better understanding of any problems that the property may have, from the little niggles to the big stuff. You get to enjoy a weekend away and you can also make the experience better for your tenants.
Location, location, location
As with every property, a large portion of the value of a holiday home comes from where it is. If you’re planning on letting out your holiday home during times that you’re not staying there, being in a high yield and desirable location will benefit you in the long run.
If you are able to charge higher premiums for a stay at the property and it’s in a location where short stay properties are in high demand, then you’re onto a winner.
The fact that your investment will be returning a good rental yield is just the icing on the cake. Investing into a holiday home in a popular location benefits you as well as the holidaymakers that are staying there.
During the times that you’re staying in the property, you will be able to enjoy the top-notch amenities that are helping the property produce profits for you, once again ensuring that both you and your tenants have the best experience possible. Like I said earlier, understanding the area is always a positive since you can utilise the attractions to market the property to potential tenants.
Buying a holiday home requires a normal mortgage and not a buy-to-let or second residential one. You will also need to inform HMRC of your intentions as it is highly likely that you will need to pay tax on any income that you gain from it.
However, there are allowances that you are entitled to as owning a holiday home counts as a trade. This might mean that you can claim capital allowance on furnishings and equipment and capital gains tax reliefs.
These benefits require your property to meet certain criteria, such as it being available for 210 days per year and must be let for more than 105 days a year without a single guest staying for more than 31 days.
Letting it out
There are now some great websites that you can use to advertise your property and get your calendar filled up, so take a look at which ones best suit your property. Feel free to be picky about who comes to stay, as you need to protect your investments, so you are well within your rights to screen your guests, ban stag parties and make it a non-smoking property.
Owning a holiday let can be a great investment that can combine the benefits of making a profit with having your own holiday home on hand whenever you want it. What’s not to love?
This article was written by Mark Burns. Mark Burns is the managing director of property investment company Pure Investor, who specialise in UK property investment, Holiday rental investments and Buy-to-Let Property Investment.